by Scott Harrington
Wall Street Journal
December 13, 2009
The public is growing wary of the cost of ObamaCare. Yet there is one budget-busting provision that hasn’t received the attention it deserves: a new long-term care entitlement.
Known as the Community Living Assistance Services and Supports Act, or Class Act, this entitlement is in both the House and Senate bills and was a top priority of the late Sen. Ted Kennedy. It would provide at least $50 a day toward home or institutional care, equipment and supplies, or home improvements to assist the daily living of those who are enrolled. It is also a significant part of the reason that Democrats claim that ObamaCare is fiscally responsible, but this turns out to be a short-term budget ruse.
The Congressional Budget Office (CBO) projects that the House and Senate health-care bills will reduce federal deficits over the next 10 years by $138 billion and $130 billion, respectively. The lion’s share of the savings, $101.6 billion and $72.5 billion, would be realized by the long-term care program.
How can a new entitlement reduce deficits? With budget accounting, the program will pile up more revenues than its costs. But only in the short run. In the long run, it will blow a hole in the federal budget.
Private long-term care insurance works like other insurance policies. Those who buy policies pay premiums over a prolonged period of time. The premiums pay for the benefits they may eventually receive and cover the benefits for those who need immediate care.
To make sure that a premium paid today can pay for a benefit promised for tomorrow, an insurer determines the amount it will need for future benefits, marks that amount as a liability, and puts aside funds to pay for it. An insurer also creates an additional pool of capital to act as a buffer, just in case.
That isn’t how the Class Act would work.
The article continues at WSJ.
